An Optimal Decision Making Model for Supplier and Buyer’s Win-Win Strategy in a Two Echelon Supply Chain Geon Cho BK21 ○ n Biz Convergence Team Chonnam National University, Korea gcho@chonnam.ac.kr JaeJon Kim BK21 ○ n Biz Convergence Team Chonnam National University, Korea jaejon@chonnam.ac.kr Hyong Ho Park School of Business Administration Chonnam National University, Korea hhpark@chonnam.ac.kr Choon-Sup Noh School of Business Administration and Trade Sunchon National University, Korea noh@sunchon.ac.kr Soon-Hoo So Division of Business Administration Pusan National University, Korea sunuso@hanmail.net Yi Sook Park BK21 ○ n Biz Convergence Team Chonnam National University, Korea ispk7@nate.com Kyung Ho Jung BK21 ○ n Biz Convergence Team Chonnam National University, Korea haveagoodday77@nate.com Abstract Supply chain management (SCM) is becoming extremely important to achieve competitiveness in the current business environment. Moreover, supply chain partnership between suppliers and buyers in SCM have had a significant impact on supply chain performance. In this study, we develop a quantitative model based on the supply chain partnership under several assumptions. For this purpose, we first prove several basic theorems which verify the relationship between supplier and buyer’s total profit for two cases, with and without supply chain partnership. We then prove that there exists the supplier's selling price per unit which makes the maximum total profits for both supplier and buyer with supply chain partnership greater than those for any given supplier's selling price per unit without supply chain partnership. 1. Introduction Recently the paradigm for corporate management has been rapidly shifted from the competition between individual firms to the competition between supply chains. It is because most of the firms have realized that, to survive in a competitive global business environment, it is not enough to have only the competitiveness of individual firms, but essential to share their win-win strategies together through their close relationships. Consequently, supply chain management (SCM) that enhances supply chain performance by minimizing the total cost or maximizing the total profit as well as the service quality for customers has become one of key issues in the current business environment. In particular, together with the spread of SCM, the relationship between suppliers and buyers has been changed significantly. In fact, recently, suppliers and buyers have been trying to establish the supply chain partnership which enables to coordinate together so that they are able to obtain the global optimum at which they maximize the supply chain’s total profit, whereas suppliers and buyers in the past just tried to get the local optimum at which they maximize their Proceedings of the 41st Hawaii International Conference on System Sciences - 2008 1530-1605/08 $25.00 © 2008 IEEE 1